Jefferies (JEF) is a company I've had my eye on for a long time. But I've never owned a single share until this downturn caused a huge reduction in the share price. In my view, this represents a terrific opportunity.

It used to be known as Leucadia (and traded as LUK), and was known for compounding book value at good rates over a long period. But the last decade has not been as kind. The company has fallen from mythical status to also-ran in the market's eyes, due to a number of missteps resulting in lackluster returns.

But I think the stock has fallen too much now. The company now trades for just 2/3rds of tangible book value. For a lot of companies with assets tied up in machinery for which there is no market, this means very little. But a lot of Jefferies' balance sheet is liquid, and the company has been buying back its shares at a blistering pace.

One concern I have is the merchant banking portfolio, where Jefferies owns a number of minority stakes in illiquid securities. Some of these securities may suffer writedowns (or more importantly, they may be permanently impaired as a result of the pandemic), and with a levered balance sheet these losses can have a large effect on equity. However, I also think some of these may be worth more than stated, as it is much harder to write *up* securities than it is to write them down.

In any case, with the current margin of safety, I think this is an asymmetric bet on a fallen angel.

Author has a long position in shares of JEF